For any business, it's very important to reach their customers easily and deliver their products quickly. In the last couple years, customers have started choosing online mediums to buy products over offline channels. This trend was greatly accelerated once Covid struck and is expected to grow exponentially in the next five years.
But for a successful e-commerce business, whether it is a small player just starting out or a big player looking to catch on the online trend, it's crucial that it has supportive e-commerce fulfillment services.
What is e-commerce fulfillment ?
But before that we need to understand what e-commerce is. For hundreds of years, goods have been sold in a physical marketplace where buyers and sellers meet. But with the capabilities that the internet offers, businesses no longer need to open a physical store to sell their goods or customers don’t need to go to a shop to purchase things that they want. They can buy almost anything they want on just a click of the mouse, sitting in the comforts of their home. This is e-commerce.
In this blog, we will focus on the whole ecommerce process from the seller’s perspective. Any person can start their business by manufacturing or purchasing products that they then list on an online marketplace like Amazon, Flipkart, etc or they get their own website in place. Then, they start getting orders from customers. The activities undertaken to successfully deliver these orders to customers constitute e-commerce fulfillment.
The following broad activities are a part of the fulfillment process:
E-commerce store and fulfillment center integration- When a business starts selling online, it becomes an e-commerce seller and its goal is to establish a seamless flow between different operations so that all orders are fulfilled successfully in the least possible time.
The first step towards this is to integrate its online store with the fulfillment center. As soon as an order is received, it should be communicated to the fulfillment center for further processing. If there is any lag, then the process will be delayed resulting in a higher lead time, that is, the time that it takes for the customer to receive his product from the time when he ordered it.
When the online store and fulfillment center are integrated with the help of a warehouse management software, the orders received directly flow to the warehouse (the fulfillment center), where it is picked, packed, and then shipped, resulting in a smooth fulfillment process.
Inventory management- A proper system is required to receive the merchandise at the fulfillment center, inspect it for any discrepancy and then log it into the system as inventory. Also, according to the demand for products, it’s necessary that a seller stocks-up the products in high demand.
Any fulfillment center that promises a real time inventory management must be able to place the stock into inventory within a day or two of receiving it. It will also provide the sellers with demand forecasts and planning to avoid stock-outs of their most profitable products, thereby decreasing lost sales and increasing top-line revenue. Further, all the inventory will be managed in a way that product damages on the shelves are least, and shrinkage is low.
Order fulfillment- When a customer places an order, the fulfillment center will locate the right products, pick and pack them, after labelling them correctly. Here a good fulfillment center will give a very high accuracy which is very vital. Mistakes in picking and packing and delivering wrong orders can cost a business in terms of lost customers. Today, when customers order a product, they don’t want to wait too long. So, any delay or a long delivery time will frustrate them. Therefore, it’s crucial to have a very quick turnaround time for orders. Also, if the fulfillment center is centrally located (shipping from the center should not take more than two or three days), it will enable a seller to fulfill its orders quickly.
Returns processing (reverse logistics)- Returns from customers are inevitable. So, making this process easy and convenient for the customers can help build trust with them and thus, drive sales higher.
The fulfillment center must process returns quickly so that customers can get their refunds. Also, the sooner the returns are processed, the faster the products can get back on the shelf to be sold again. There should also be a proper system to handle returns that are damaged. Also, the role of customer service is also important in processing of returns. It can get customers to buy again or send them away.
So, E-commerce fulfillment has the potential to drive down costs and/or drive up the overall sales revenue and thus, demands a high priority in the overall e-commerce strategy for any business, small or large.
Now, there are two ways to drive the e-commerce fulfillment strategy.
First , an e-commerce player has its own fulfillment centers, fully equipped with all the technology and resources and it also ships products by itself. That is, it keeps every part of its business in-house. However, this works only for big businesses that have enough money and resources to invest in setting up their own warehouses in different regions and can leverage economies of scale.
Second Second, the seller just focuses on the core of his business and marketing & branding of his products. Everything else is outsourced to other companies. The seller can take the services of a 3rd Party Logistics company that will provide an end-to-end solution, from a fulfillment center to storing the goods in and managing the inventory to final shipping to customers. So, for a small or medium size business, the second option works the best. When a business is small, it has a smaller number of customers and orders are also not that many. Further, because of a lack of money, it has to be very judicious in its expenses. Then if it wants to expand, it has to get a new warehouse for fulfillment that will cost very high. To operate the fulfillment center, it further needs manpower, technology, and other resources. If it does the last mile delivery by itself, heavy shipping costs are incurred. All these constraints greatly limit the ability of a small or medium business to grow and expand. But there is an alternative. 3PL is the solution to all the above mentioned problems and even more.Let’s see how exactly outsourcing your fulfillment services to a 3PL will benefit small businesses:
- 3rd party logistics companies will provide an e-commerce seller with a dashboard, customized for all its business needs. This will give valuable insights on things like which region gives the highest sales. Based on that insight, sellers can aggressively plan for that region and increase their business.
- They will receive and manage the inventory, thus freeing the sellers to focus on other vital aspects of their business, like marketing and branding, which is very important and needed to increase their reach to customers and drive orders higher. Also, manufacturing a product or marketing it is vastly different from operating a warehouse or fulfilling the last mile delivery. Thus, focusing on the activities for which a business has the right expertise will give it higher dividends.
- They will take care of the end to end fulfillment process, including compliance issues with different vendors, handle returns, and fulfill orders.
- Shipping is a major cost contributor in the fulfillment process. Taking the services of a 3PL will help a small business get discounts from shipping carriers. Also, if it finds that most of its orders come from Delhi and Uttar Pradesh, then it can have most of the inventory stored near those areas. A 3PL will give flexible warehousing options. And because of being near the customers, shipping costs can be significantly cut down.
- A proper warehousing management system that integrates all aspects of the online business for an e-commerce player, from receiving and managing inventory to fulfilling orders and handling returns, is of utmost importance. It ensures that inventory arrives well in time and placed properly in the fulfillment center to streamline the whole process of order fulfillment, resulting in happy customers.
Therefore, a small company will be able to access the vast network of warehouses, transportation & shipping partners that 3PLs have and leverage them to scale and expand its business. Even big businesses can do far better by focusing on core activities and leasing out the rest to 3PLs because they can handle them very efficiently and help improve both the top-line and bottom line.
We, at Godamwale, provide a flexible on demand ecommerce fulfillment solution that takes care of all business needs of all e-commerce sellers, small and big. We have a network of warehouse providers, transport logistics and shipping partners across the width and breadth of the country. Be it Mumbai, Hyderabad, Delhi or a place in north east, we will serve just like an extension to the seller’s business and help them with all their fulfillment needs so that they achieve all their business dreams.
This blog is written by Dheeraj Kumar who is pursuing his MBA from IIM Kashipur